Buy a car or house first?

87 Replies

Buying a car is not good debt. Go buy a cheap house somewhere for around the same price and rent it out. 

I am now up to 5 rental properties that I own 100% free and clear. I still drive a 2005 Toyota Truck that has been beat to death. Hit two deer with it, just took the money and paid it off the last time and never "fixed it."

My wife has a nice vehicle we use for long trips, but I will drive a beater for years to come. 

Use that money to make money.

I've been in your exact situation before. Paying $450/month for a car at 19 years old is not a wise decision especially once you factor in insurance and other costs. I applaud you for having the foresight and thinking about buying a house at such a young age. My advice would be to buy the most reliable car with the lowest amount of miles that you can afford to buy with cash. 

@Michael Guzik - I bought my first car when I was 19 and it was one of the worst decisions I made, but a lesson in itself. I live in NH, where everything is very spread out, little to no transportation, and having a vehicle is a necessity.

I was making around 25K a year, (with overtime), I didn't have any credit and somehow I was able to finance a 20K car- mind you this was 2006 before the crash. The payments were $420/month, insurance was 350/month, gas crept up to 450/gallon for 93, oil changers were $100 every 5,000 miles, and I still had to pay rent, feed and clothe myself, and still manage to enjoy being 19.

Not only was I breaking my back and working to death for a depreciating asset, in a year my needs changed completely! I ended up going to college and to keep my car I had to work part-time which took a lot away from the experience- there was no Uber back then or that would've been a good gig. I missed a couple payments which was stressful but I was able to somehow always make it work out.

I graduated in 2012 and still had about 8 payments left and it was tough. I struggled to find a job in my field and was making roughly the same amount of money as I did before college- ouch. It was still a burden and the first summer I had the vehicle in the shop for a huge engine over-haul, and the day I got it back I was rear-ended! 

When the vehicle was paid off was when I was finally able to start saving up for an investment property. It wasn't much at first but it was something. Not having a car payment is the BEST! Even if I had to replace wear and tear items the car wasn't costing me more than $1200/year to maintain. 

I finally decided to sell the car in September after I kept the car for 10 years with no payment for the last 4 years. Because I had a reliable car and no payment I was able to save more money that a lot of my friends who drive new cars and have nice things, (actually I'm the only one with property too!). 

If I had to do it all over again I wouldn't have stretched myself that thin. I learned a lot on how to be frugal but I missed out on a lot always having to work. Yeah, you could take over your dad's loan, but $450/month is 1/5 of your overall income, (Net?/Gross?)! Not to mention insurance, gas, and maintenance! On paper your loan/income might be low, but realistically you're really taxing yourself with 1/5 of your income dedicated to a vehicle. To put it in perspective, my new car now costs me maybe 150 more than my old car, but I also make more than triple what I did when I bought my first vehicle.

Just my experience!

RIP GTI

I would say hold off on the car and if you want to build credit open a credit card and put 2-3 small monthly services like netflix, etc on it and pay it in full each month.

Buy a used car for 2-3K and be done with thinking about a car.  What you drive doesn't really matter in the grand scheme of things and that capital you'd be spending monthly on your car can be used for much better things.

Be very carful when considering education as a path to higher earnings. Depending on your chosen path that could turn out to be a waste of time and money. Research wage scales for any field of study you intend to pursue and find out about job availability.

You would be amazed at the number of people with degrees that have never used them.

At 19 you could probably do better getting into a high paying trade. Again research carefully since they all have different potential wage scales and amount of effort to earn a dollar.

Plumber, electrical, HVAC, all good especially on the industrial/commercial side. Definatly not drywall or brick layer.

@Derek E. Thank you for your comment! That's what I'm going to do Derek! I really would rather have the house but now the problem is my parents wanting me to get the new car instead of fixing the old one. I honestly used to want a new car so badly but after talking with ya'll here on BP I realize that is thinking short term.

@Garrett Hogan Thanks for the comment Derek. I am most likely going to just fix up my old car and keep driving it until it dies lol.

@Kate Gagnon Thank you so much for the comment and sharing your experience with me! I really do agree with all you guys after hearing your stories and opinions on the matter and I realize I'm just thinking of the short term and quick gratification instead of the long term impact it will have on me.

@Jeremy Dixon Thank you for the comment Jeremy! That's more than likely what I'm going to do just invest the 1,500 into fixing my car and keep it since it has been reliable and a great drive!

@Thomas S. Yes sir I completely agree with you there. I would like to either get into the financing end of things or like you said in the plumbing or electrical side of things since those would not only help me with income but also with my real estate goals and knowledge! 

Originally posted by @Michael Guzik :

@Derek E. Thank you for your comment! That's what I'm going to do Derek! I really would rather have the house but now the problem is my parents wanting me to get the new car instead of fixing the old one. I honestly used to want a new car so badly but after talking with ya'll here on BP I realize that is thinking short term.

You say its $9,000 for the car and it will never pay you anything in return.

Well I just bought another house for $7,000. Already has a long term tenant on HUD that rents for $441/month and is due/will be raised in 3 months.

So I will be spending $2,000 less than you would for the car. The difference is, I am getting paid $441/month and you will be paying $441/month. 

Just spend some time letting that sink in. 

@Derek E. That's definitely an asset where as mine would be a liability!

Originally posted by @Michael Guzik :

@Derek E. That's definitely an asset where as mine would be a liability!

That is how I look at things. I can't justify buying a newer vehicle because I know I can use that same money to up my cash flow. I pay cash for all places so there is less risk with mortgage payments and such. 

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